An indictment naming Roger Ver—known as “Bitcoin
Bitcoin
According to the indictment, Ver, an early investor in bitcoin, has been charged with mail fraud (18 U.S.C. § 1341), tax evasion (26 U.S.C. § 7201), and filing false tax returns (26 U.S.C. § 7206(1)).
An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Allegations
According to court records, Ver was born in Santa Clara, California, in 1979. On February 4, 2014, Ver allegedly obtained citizenship in St. Kitts and Nevis (a two-island country in the eastern Caribbean Sea, generally regarded as tax-favored) and subsequently renounced his U.S. citizenship. When formally giving up citizenship, known as expatriating, Ver was required under U.S. law to file tax returns that reported capital gains from the constructive sale of his worldwide assets (including bitcoin) and to report the fair market value of his assets. Expatriation also requires taxpayers to pay a tax—referred to as an “exit tax”—on those capital gains.
Prosecutors allege that, by February 4, 2014, Ver and his companies (MemoryDealers.com, Inc., and Agilestar.com, Inc., two businesses that were based in Santa Clara, California, and sold computer and networking equipment) owned approximately 131,000 bitcoins that traded on several large exchanges for around $871 each. MemoryDealers and Agilestar were said to hold approximately 73,000 of those bitcoins. The charging documents allege Ver began acquiring bitcoins no later than April 2011.
Court documents also allege that Ver hired a law firm to assist him with his expatriation and to prepare his expatriation-related tax returns.
Under the tax code, when you expatriate from the U.S., if you are a “covered expatriate,” all of your property is treated as if you sold it on the day before the expatriation date for its fair market value—that’s sometimes referred to as a “constructive sale.” Any gain arising from that constructive sale must be taken into account for that taxable year and is subject to tax, sometimes referred to as an “exit tax.” Covered expatriates are also required to certify that they have complied with their tax obligations in the five years before expatriation and, among other things, provide information about their net worth, income, assets, and liabilities as of their expatriation date.
Prosecutors charge that Ver provided or caused to be provided false or misleading information to the law firm and appraiser that concealed the true number of bitcoins he and his companies owned. As a result, the law firm allegedly prepared and filed false tax returns that substantially undervalued the two companies and their 73,000 bitcoins and did not report that Ver personally owned any bitcoins.
Further, according to court documents, on October 14, 2015, Ver’s tax preparer e-mailed Ver and requested that he provide the total number of bitcoins he owned on February 4, 2014, but Ver did not tell them how many bitcoins he had. He instead allegedly asked, “[c]ompletely hypothetically speaking, what would the ramifications be if I were to have had 200,000 [bitcoins] at the time of my renunciation?” He was reportedly advised to obtain an appraisal from a third party.
The indictment further alleges that by June 2017, Ver’s two companies continued to own approximately 70,000 bitcoins. Ver allegedly took possession of those bitcoins and, in November 2017, sold tens of thousands on cryptocurrency exchanges for approximately $240 million in cash.
Prosecutors also claim that even though Ver was not a U.S. citizen at the time, he was still legally required to report to the IRS and pay tax on certain distributions, such as dividends from MemoryDealers and Agilestar, which were U.S. corporations. Ver allegedly concealed from his tax preparer that he had received and sold bitcoin from MemoryDealers and Agilestar that year. Specifically, the court documents allege that in November 2017, Ver transferred tens of thousands of bitcoins to exchange accounts in his name and then sold them for U.S. dollars, and then transferred approximately $240 million from those exchange accounts to bank accounts either in his name or under his control in the Bahamas. Prosecutors say that Ver’s 2017 individual income tax return did not report any gain or pay any tax related to the distribution of those bitcoins to him.
Ver is alleged to have caused the IRS a loss of at least $48 million.
Investigation & Arrest
IRS Criminal Investigation’s cybercrimes unit is investigating the case. While the indictment was filed earlier, Ver was arrested this weekend in Spain based on the U.S. criminal charges. The U.S. will seek Ver’s extradition to stand trial in the U.S.
Bryan C. Skarlatos of Kostelanetz L.L.P., who previously represented Ver, has confirmed that he currently represents Ver. Skarlatos told Forbes, “For now, all I can say is that we are disappointed and surprised that Mr. Ver was arrested while traveling in Spain.” He continued, “This prosecution never should’ve been brought. Mr. Ver relied on leading tax professionals to help him report his Bitcoin and he always intended to fully comply with his U.S. tax obligations. We look forward to establishing his innocence in court, if necessary.”
More On Ver
Earlier this week, Ver posted on X, formerly Twitter, “Don’t expect bad people to do good things.” The tweet to his nearly 3/4 million followers seemed to hint at what was to come—several of his followers tweeted out messages of support in response.
Ver’s account is verified on X since “it’s an affiliate of @joseon_empire.” Joseon self-identifies on its website as “the first sovereign cyber nation” and “the non-territorial successor state to the Joseon Empire which was founded in 1392.”
Ver released a new book, Hijacking Bitcoin: The Hidden History of BTC, a few weeks before his arrest. Co-written with Robert Patterson, it promises to unveil the “hidden history of BTC.”
Read the full article here